* Asian stocks sink, fuelling safety buying of yen
* New Zealand dollar hits 7-year low vs yen
* Euro on back foot before ECB rate decision
By Satomi Noguchi
TOKYO, Jan 15 (Reuters) - The yen rose broadly on Thursday as
a plunge in Asian stock markets spurred risk aversion, while
investors looked cautiously ahead to an interest rate decision
from the European Central Bank later in the day.
The yen gathered strength as Asian shares sank, with Tokyo's
benchmark Nikkei 225 tumbling nearly 5 percent <> as fears
about a banking crisis and the global recession returned.
The Japanese currency tends to outshine other major
currencies for its perceived safety when the market is under
severe stress.
The yen hit a seven-year high against the kiwi as the
deteriorating economic outlook added to worries about a possible
downgrade to New Zealand's foreign-currency debt rating after
ratings agency Standard & Poor's cut Greece's sovereign debt
rating. []
Overall, currency trading was calm compared with the equity
market sell-off as many investors refrained from aggressive
trades before seeing how much the European Central Bank cuts
interest rate later in the day, traders said.
"The yen was forced down slightly on the poor machinery
orders, but its downside is likely to be limited as the market
focus is on stocks," said Masafumi Yamamoto, head of forex
strategy Japan at Royal Bank of Scotland.
"The trend points towards the yen firming while stocks
decline," Yamamoto said.
The dollar slipped 0.2 percent from late U.S. trade the
previous day to 88.88 yen <JPY=>, after an early rise to 89.26
yen on trading platform EBS.
The euro fell 0.1 percent to 117.35 yen <EURJPY=R> towards a
six-week low of 116.57 yen touched the previous day on EBS.
The yen fell briefly after government data showed Japanese
core private-sector machinery orders, a key gauge of corporate
capital spending, fell a record 16.2 percent in November from the
previous month. []
The euro declined 0.1 percent to $1.3173 <EUR=>, but stayed
above a one-month low of $1.3093 on EBS the previous day.
The Australian dollar briefly dropped to a one-month low
against the dollar and the yen after data showed a steep drop in
full-time jobs and a rise in the jobless rate last month,
reinforcing the case for further rate cuts.[]
The kiwi fell to 47.40 yen, the lowest since September 2001,
before regaining some ground to be down 0.7 percent at 47.80 yen
<NZDJPY=R>.
The Aussie touched a one-month low of 58.26 yen before edging
up 0.1 percent to 58.75 yen <AUDJPY=R> in choppy trade.
ECB RATE CUT
The ECB is expected to lower interest rates on Thursday for
the fourth month running as dismal data raises the chances of a
recession deepening in the euro area.
Differing comments from policymakers have left financial
markets unsure of how deep a cut to expect, with expectations
varying from a quarter-point reduction in the current 2.5 percent
benchmark to another half-point move or more. []
"The euro's broad weakness is likely to continue beyond the
ECB rate decision as credit downgrading and more banking problems
in the euro zone are adding to worries about the further
deterioration in the euro zone economy," said a trader at a
Japanese bank.
Citigroup <C.N> and Bank of America <BAC.N> faced new doubts
about their ability to fund their massive losses, dragging global
markets down. But European banks also showed signs of fresh
stress as Deutsche Bank <DBKGn.DE> posted a surprise
fourth-quarter loss of more than $6 billion.
(Additional reporting by Shinichi Saoshiro; Editing by Hugh
Lawson)
